Commodity Tax Harmonisation with Public Goods - an Alternative Perspective
AbstractThis paper investigates whether it is possible to find Pareto-improving commodity tax reforms that harmonise taxes between two countries when governments supply public goods and thus have revenue requirements. It is shown that, with two goods, and starting from Nash equilibrium taxes, any harmonising reform will always make both countries worse off (better off) ifthe imported good is taxed less heavily (more heavily) than the exported good by both countries. An example suggests that harmonisation is unlikely to be Pareto-improving if the revenue requirement is high, and the demand for imports is relatively price elastic. An alternative definition of harmonisation, difference harmonisation, which may yield Pareto-improvements under more general conditions, is proposed.
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Bibliographic InfoPaper provided by Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics in its series EPRU Working Paper Series with number 95-10.
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Other versions of this item:
- Lockwood, Ben, 1995. "Commodity Tax Harmonization with Public Goods - An Alternative Perspective," CEPR Discussion Papers 1304, C.E.P.R. Discussion Papers.
- Lockwood, B., 1995. "Commodity Tax Hamonisation with Public Goods - An Alternative Perspective," Discussion Papers 9503, Exeter University, Department of Economics.
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
- H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
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